Category Investments

It's about infrastructure

20 July 2006 Angelo Coppola

According to Kevin Lings, economist at Stanlib, the short term view for South Africa is that the consumer will continue to spend to maintain their lifestyle, despite any international and local increases in interest rates.

There may be some bad debt increase, over time, however.

The risks in terms of the individual consumers are less confidence, inflation starts eroding real income, cost of servicing debt increases and growth in social grants slow down, although the level of insolvencies is still low.

The consumer has done the initial job and the focus has now moved to infrastructure spending. Lings says that there is Eskom to spend R83bn over five years, moving to R110bn, while Transnet has just announced a R64bn spend in all areas of activity, while roads plan to spend R21bn. Finally the 2010 FIFA soccer World Cup should see R6bn invested.

Keeping foreigners invested in SA will depend on the infrastructure spend. The foreigners will keep the money in SA. They have however changed their focus from the consumer side and re-jigged their portfolios.

Lings maintains that it is highly unlikely that foreigners will underweight SA in their portfolios. The world is experiencing volatility, and the world is also generally impacted by the high oil prices. SA is part of the world.

He maintains that something drastic would have to happen, for instance SA loosing the right to host the 2010 FIFA world cup but that is unlikely to happen.

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